Scaling Lean

1. Lower Yearly Revenue Target You can always lower your yearly revenue target, but because that requires us to lower our desired outcome, we’ll leave this option as a last resort.

Inventory represents all the money invested in the customer factory toward things it intends to sell. This includes things you expect, like your product, but also unfinished goods (users), finished goods (customers), equipment, and other infrastructure that goes into the manufacturing of these goods (e.g., servers, software, etc.). The term “invent

Once you have these customer throughput rates, you can then revisit your Lean Canvas and put your customer segment and channel assumptions to the test. ■ Is your customer segment big enough? ■ Do you have any scalable channels identified already for building a reliable enough path to customers?

Even as a solo bootstrapper, you probably have (and if not, should have) some ballpark number to justify your return on effort per project. This could very well be a $100M exit, but could just as well also be generating an extra $1,000/month of passive income.

The users of the Red Cross are the people in need that the organization serves. And donors are the customers. Because these models are usually impact driven, the number of people helped represents the derivative asset that donors fund. If the Red Cross stopped serving these people, the donations would dry up accordingly.

Operating Expenses Operating expenses are the costs expended turning inventory into throughput. They include things like salaries and other costs incurred in the running of the system. The distinction between inventory and operating expenses may appear fuzzy. It helps to think of inventory as assets that contribute to the valuation of a company and

Next, in order to establish a business model that works, the following two conditions must be met: This is the value equation that drives your business model’s unique value proposition (UVP). You need to create more value for your customers than you capture back.

And finally, they want to know how you will defend against copycats and competition that will inevitably enter the market if you are successful—your unfair advantage.

Venture capitalists Marc Andreessen3 and David Skok4 both use a similar 10x rule in the growth models for their portfolio companies. Like a Fermi estimate, the 10x rule isn’t intended for significant precision but as a rough (yet good enough) ballpark. It works reasonably well for most products, but you should always check your own numbers to see i

“The essence of strategy is choosing what not to do.” —MICHAEL PORTER Incorrect prioritization of risks is one of the top contributors to waste.